The RIAA: No Longer Suing

According to this article posted on Current.com, the Recording Industry Association of America (RIAA) has officially announced that they will no longer sue civilians for sharing of copyrighted music over the internet. According to the article, over 35,000 people have been sued by the RIAA since 2003, with an average settlement amount equaling about $3,500 per case. The RIAA started its campaign to stop copyright infringement of recorded music over the internet during the Napster years (1999-2001). Subsequent file sharing services have all come under fire by copyright holders backed by the RIAA, and civilian users of these services (the file "sharers") have been primarily targeted. Now the RIAA says it will focus on the Internet Service Providers (ISPs), mandating that the service providers warn users to stop the infringing actions and to block repeat offenders' access to the internet.

Essentially what the RIAA is saying is that it is now attempting to stop being the bad guy that it has quickly become over the past few years in the minds of digital music consumers. Thanks to Apple and iTunes, the music industry has found a way to legitimately sell digital music online. Further, due to an agreement by the RIAA and other industry associations, songwriters and music publishers are now going to get paid a royalty for the streaming of songs online, a development that has been under heavy debate in recent years. Whether or not one agrees with the actions of the RIAA and its constiuents, the fact is that the industry is slowly shaping itself to fit the digital and new media world, which is very exciting indeed.

Selling Music in a Digital Age: Recent Developments

Following up on my last post, I would like provide updates on some recent developments within the digital music retail world. First - and quite a personal dismay - is the new website Made Loud, which is a digital online music retailer for the independent artist / social networking site. Obviously, the developers of Made Loud read my most recent post that covered this exact business opportunity and stole the idea from me (wink, wink). Despite my personal resentments, after perusing the Made Loud site, its apparent that they have put a lot of thought into the project. Artists can create a page, upload their music and set a price-per-download rate, and then commence with reaching out to fans. It is a win-win situation for the artist who owns all of his or her own master recordings. In fact, according to the FAQs section of the site, "Artists keep 80% of all digital download sales and 85% of all merch sales. Artists also choose their own pricing." (par. 3). Purchasing is made almost too easy through Pay Pal. In a music world that has been dominated by conglomerates and umbrella corporations for decades, Made Loud and sites similar to it are paving the way towards the future of this industry.

The second exciting development that caught my attention is the new digital music retailer LaLa, which offers 10 cent downloads of songs as well as a full, free preview listen of the whole song prior to purchasing. The catch: one can only listen to his or her songs via a web browser, meaning an internet connection is required at all times during use. At first, this sounds like a major annoyance, but in a tech-obsessed world dominated by internet phones and computers, the idea makes a lot of sense. With all of one's data stored electronically on the company's servers, there is no need for the information to be stored on a personal hard drive; all one would need is a phone or computer with an internet connection. According to this article by Michelle Quinn, a staff writer for the LA Times, the company also offers an MP3 download for an extra 79-89 cents, which of course can be store on a hard-drive. Quinn further states that, "Lala has a deal with labels that lets it scan a user's music library and offer the user those same songs via any Web browser [...] That gives Lala information about a person's tastes so it can target music suggestions" (par. 15-16). Additionally, according to the "How It Works" section of LaLa's site, the service can "quickly match the songs on your computer to Lala's licensed catalog [...] Songs you already have and playlists you've created are instantly added to your Lala collection for free" (par. 2).

It is important that these sites continue to develop and spawn multiple imitators. For too long, the music industry and its consumers have had only one option for the purchase of music - the record store. With these recent developments, the industry and its constituents are finally adapting to new, simple methods of e-commerce, albeit light-years behind other industries. With the major setbacks brought on by the pirating of digitized music and the state of the U.S. economy in general, things for awhile were looking quite bleak. Yet, these exciting new websites prove that there is light at the end of the tunnel for the music industry.

Myspace Music: The Good, The Bad, The Ugly

A recent music industry blog article caught my attention the other day. It is written by Dave Kusek, the Vice President for the Berklee School of Music, and it features his thoughts on the recent revamping of "Myspace Music". Without going too deep, essentially Kusek shuns the new addition to the site claiming that this new music section is just a copy of the existing social media sites, and has therefore lost sight of the indie artist. In his exact words, the new addition "falls short of the comprehensive one-stop online music store" that most people were expecting (par. 5). In order to paint a more complete picture, I am attempting to build upon his remarks, and by offering my own insight into the matter, ideally provide some sage advice for the music industry gurus out there.

Kusek's discussion overlooks a key fact that is important to this discussion - the fact that Myspace is a corporation; one which essentially makes its money though advertising. Since its inception, Myspace has been focused on one goal: get as many users as possible and then hit them with advertising. Trent Lapinski, a blogger and internet "techie" discusses this point in his article The Business of Spam 2.0. He states that Myspace (since its beginnings), was a "site created by a marketing company known for viral entertainment websites, pop-up advertising, spam, spyware, and adware", utilizing clever marketing tactics to give it a friendly, so-called indie feel (par. 2). Most people can plainly see through that friendly facade, however, especially considering the fact that Myspace has always been a free service. The notion that its creators ever cared for more than anything than advertising dollars is absurd, with the music portion being one of the most clever marketing tactics used to cover up that fact. Consequently, while the site did have an indie feel to it and appeared to appeal to the upcoming/indie artist, that perception was always entirely overshadowed by advertising. Now, with the addition of the new, revived music section, Myspace is further bolstering its ad revenue by allowing for the hottest and biggest artists to be featured on the site. It is easy to see how one of the best ways to gain advertising revenue is to have the biggest/hottest artist as a part of your media, (much like how TV network affiliates pay a license to use the hotter network TV shows to generate greater revenue for themselves).

Kusek also purports that the new music section merely copies the other existing sites such as Imeem, Last.fm, and a host of other music and social media sites (par. 7). Is it to their disadvantage? Probably not - the added advertising revenue created as a result of having access to the four major labels' content will be realized in a way that meets all prior expectations. Om Malik, founder and senior writer of Gigaom.com, recently stated in this article that -according to Myspace CEO Chris DeWolfe - Myspace is not trying to establish itself as an online retailer because there is really no point in competing with iTunes (par. 2-3). In essence, Myspace is establishing itself as a social-networking site that allows one to search and discover new music and then go and buy it from Apple. In a way, its simply another marketing tactic on the part of the 4 major record labels who - according to Kusek - own a 40% share in the new venture (par. 12).

One might be asking, where is the entrepreneurial business opportunity in all of this? The answer is already in existence and it is called CD Baby. CD baby has been focusing on the independent and upcoming artist for years now, and has been hugely successful within that smaller, niche market. There exists only one shortcoming, however, and that is the fact that there is no social-networking aspect to CD Baby. This is most likely a result of a conscious decision on the part of the owners and is therefore a key to their success as a highly differentiated online music retail site. That said, however, think about the possibilities if one were to create a site much like CD Baby, which also included a social-networking aspect, allowing for artist-to-fan interaction through email, message boards, and the like, all under the online music retailer umbrella. This would make it easy for upcoming artists to control their own interactions with fans, promote their own music, and then provide them with an easy method of purchasing their music. If you take CD Baby's already stellar track record and tack on a social-networking aspect, it is easy to see how one could make a healthy profit from sales commissions and advertising with the coupling of social-networking and online music retailer.

How to Sell an Artist: New Methods of Generating Revenue

With the onslaught of internet downloading, iPods, and the ever-decreasing price of home recording technology, artists these days are facing new challenges and are being forced to adapt the way they make money for themselves. One of the ways in which they must adapt, and a common theme within many of my recent posts, is that artists and musicians of the near future must learn to sell things, (live concerts, merchandise, publishing), rather than solely their recorded music. In the past the roles were reversed: traditionally musicians have used their concerts and merchandise as tools to enhance the sale of their audio art (as the image to the left suggests). Yet the internet and other digital music technologies have specifically caused popular music to lose its once inherent monetary value. The remedy to this problem is to sell the artist, rather than the art. With this in mind, it is important to examine some of the ways in which artists and their affiliates can create alternative revenue streams.

An excellent, time-tested method of generating profit is through live concert appearances. The one thing that the internet cannot make more cheap or convenient for consumers is the magical connection that arises from seeing an artist one admires up close and personal. By playing concerts and interacting with fans, artists can generate serious profit from ticket sales alone. According to Jeri Goldstein, a long time artist agent and manager and author of the award-winning book How To Be Your Own Booking Agent: A Performing Artist's Guide To A Successful Touring Career, "typical percentage splits are 65-70 percent to the artist" of net ticket sales. That is a lot of money! Even in small venues (say 100 seats with an average price of $30 per ticket) the artist will take home $2250! Split between four members that is around $560 per person. If one factors in the number of hours (setup and performance) it takes for an artist to put on a production, (from personal experience it is around five hours for a small venue), that is over $100 an hour for each member of the band. According to Rolling Stone magazine's Money Makers column, which lists the top fifty money-making artists each year, Alicia Keys, (who ranked in last at number 50), made a minuscule (I joke) $10 million. Looking at these trends, if an artist can tour and play enough shows, the profit can and will be immense.

An additional method of generating revenue is through the sale of merchandise. The most direct method is when artists enlist someone close to them to setup an area at the venue and sell everything they can-tee shirts, stickers, posters, etcetera. Donald Passman, a music lawyer, states in his book All You Need to Know About the Music Business, that tour merchandise is quite profitable because “people are all pumped up by the show, they want a souvenir” (page 349). Selling merchandise at a concert adds to the total amount of money an artist can make at a performance, but there are additional methods of selling merchandise as well. The internet provides the greatest amount of exposure to consumers and can therefore be a profitable merchandise selling medium as well. Additionally, artists, their managers, and their other representatives should do all that is in their power to get artist merchandise into mall outlet, shopping center, and online retailers. Websites such as BandMerch and Rockabilia.com are great online retailers of merchandise. Passman states that an artist can get "25% to 35% of the wholesale price" when dealing with retail stores, and that "internet sales [...] are treated just like retail sales" (page 361). By allowing the retailer to withhold a portion of the total profits in exchange for their part in selling the merchandise, a profitable business deal can be achieved rather effortlessly.

In terms of ease and efficiency, the absolute best way to generate revenue is through the retention of song and sound copyrights and licensing an artist's music to third parties. In the music industry these actions are collectively known as music publishing. Through effective marketing, an artist can generate huge profit by licensing its music to television, film, and radio producers; cell phone companies (ring tones), and literally anyone else who is willing to pay for the use of the song in a public environment. The beauty of this method is that the cash flow from the artist's standpoint is entirely positive – it costs the artist nothing, (other than what it cost to create the song), and usually yields great profit. For example, synchronization of a song to a major film can generate, according to ASCAP's Music, Money, Success and the Movies article, "usually between $15,000 and $60,000." Normally, however, that amount is paid to the publisher, (who would normally split the money 50/50 with the artist), but if the artist publishes his or her own songs, then he or she retains all 100 percent of the profit. Ringtones as well are extremely profitable in today's world of MP3 playing cell phones. The Register, a computer technology review website, states that, "[A]ccording to Jupiter Research, ringtones generated $6.6 [billion] dollars in global revenue in 2006." As one can see, the licensing of music to others can be immensely lucrative.

In order to survive the changes in the music industry, adaptability and perseverance are needed. Today's artists, managers, record labels, and publishers need to subject themselves to a drastic overhaul of their traditional ways of doing business. By implementing new sales tactics, the profits one can reap will be colossal. Yet, at the same time, these alternative methods of generating revenue are dependent on one crucial factor-the quality of the music. Without great music that enriches people's lives (as the image to the right suggests), these people will never pay to see a concert, buy merchandise, or to use the song within some other creative medium. Therefore, while changes should occur in terms of what the music industry sells to consumers, the art of creating great, timeless music should never change.

Selling Tickets in a Digital Age: Why Ticketmaster Will Fail

A recent court case involving the ticket distribution giant Ticketmaster (TM) and internet technology firm RMG Technologies, came to a completion two weeks ago as the judge involved in the case ruled in Ticketmaster's favor. The ruling grants the ticket-selling giant an injunction that, according to a personal statement on its website, stops “RMG Technologies from facilitating access to [their] ticketing system.” Digital Infrastructure, an internet technology website, claims that RMG systems was responsible for developing software that circumvented security systems, that the software was rented out to scalpers, and that this software allowed these scalpers to “barrage Ticketmaster's computers with requests for tickets to perform automated purchases, crowding out other buyers.” This is not the first time that the ticket seller has been compromised by scalpers who have the technology to obtain a large number of tickets from them illegally, and subsequently sell them at higher prices on online auction websites. In fact, the article by Digital Infrastructure further asserts that internet scalping is quickly becoming a major bane; an impedance that hinders honest fans from obtaining the tickets they deserve. A colleague of mine recently posted a blog post about Ticketmaster and the scrutiny it has come to face from many unhappy ticket buyers, such as the person who created the image to the left. She states that the ticket seller has “not done enough to keep its customers happy,” and that, “[c]onvenience fees on top of base ticket prices are getting steeper and steeper.” High convenience charges, comprised security ... is the ticket seller doing anything right these days? All of the facts suggest that, no, they are not providing a beneficial service to anyone save for making immense profit for itself and its affiliates. With the music industry in its current state and as people grow increasingly less fond of the ticket giant, it is important to find new ways of distributing and selling tickets in a fair manner in order to save the economic value of the live performance.

One way to avoid its unfair ticket sales is to flat out boycott Ticketmaster altogether and buy tickets from a ticket broker or reseller. A great resource for alternative ticket-selling websites is Concert Tickets.com, which has a list of all of the best brokers and resellers. The benefit of buying from one of these companies is that, through the networks of licensed brokers that each company operates under, one can potentially obtain high-demand tickets that sell out quickly, or that were never available for sale from TM due to their pre-sale giveaways to concert promoters. Consequently, true fans have a better chance of obtaining these high demand tickets through a reseller or broker than through the ticket giant. Through my own research, however, it appears that the ticket prices offered by these resellers are drastically higher than those offered by TM. For example, floor seating tickets for the November 8th Hannah Montana/Miley Cyrus show in San Diego are offered on TM for $66.00, while Ticket Liquidator offers a comparable ticket for $893.00! Therefore, while fans benefit by avoiding TM's low inventory and high convenience charges, the price of obtaining that special ticket from a broker or reseller may not be worth the effort. That said, however, according to its About Us section on its website, TM, believes that it is still the "world's leading ticketing company", and that because of this, high demand tickets sell very quickly and are often hard to obtain. For this reason, the ticket giant created Ticket Exchange, "the event-authorized ticket resale service provided by Ticketmaster", as noted by this press release on its website. The article further claims that, "fans looking for tickets may visit TicketExchange to purchase tickets that might not otherwise be available." Consequently, although fans are increasingly wary of the ticket giant, if one chooses to believe that they are sincere in their efforts then the corporation is taking steps to lessen the burden on ticket-buyers.

A very exciting, revolutionary way of selling tickets was recently brought to my attention by another music industry colleague. Her recent post focused on the band Led Zeppelin and its reunion concert taking place in London next month. In this post she mentions how Harvey Goldsmith (the band's concert promoter) devised a new method of selling tickets to fans for the concert. Essentially, Goldsmith's aim was to avoid using what he refers to in his blog as “parasite businesses,” who, through increased ticket prices, “prevent fans from supporting their artists.” The basic principle of his new ticket system is based around a lottery, which chooses winners at random. There is also a strict limit on the number of tickets one can obtain (two per person), and the credit card used to pay for the tickets must be under the name of the person chosen by the lottery. If these conditions are not met, then the ticket is withheld from the buyer. The benefits of this system are apparent when compared to the traditional Ticketmaster model-it makes ticket buying more fair by choosing winners at random, and it also blocks potential internet scalpers who are trying to automate purchases for large numbers of tickets.

With the increase in the number of unhappy ticket-buying consumers, a market for cheap, easy-to-obtain tickets is slowly being realized. Forward thinking people such as Harvey Goldsmith are taking advantage of this opportunity and are making better businesses by learning from others' mistakes. Taking it a step further, one can envision a future where artists, record labels, and their appointed promoters will set up private event websites that specifically cater to fans by offering cheap, fairly distributed tickets, much like Goldsmith's lottery. In this way, artists, concert promoters, and venue owners/operators will work together to produce concerts by bypassing the corporate giants such as Ticketmaster, saving everyone a lot of money and bringing back the magic of the live performance to whom it belongs-the fans (see image to the right).